Abstract: 

This paper offers new evidence on the international spillovers of China's high-tech industrial policies through trade channels between 1996 and 2017. Using newly assembled data from policy documents on the national prioritized high-tech industries, I exploit the staggered policy rollout at the granular product level to identify its causal effects on China's export growth, China-Germany trade flows, and related German industries and workers. I reveal that the policies significantly promoted China's exports of targeted high-tech products to Germany and the rest of the world. Yet China also relied on imports of policy-targeted final capital equipment from Germany due to limited domestic substitutes. Using industry-level variation in exposure to policies through input-output linkages, I show that German upstream industries benefited from a positive demand shock from China and experienced employment and wage growth. Although German downstream industries increased imports from China, I find no evidence of negative impacts on their overall employment and wages. The findings suggest that domestic industrial policies, in some cases, can generate large spillover effects on foreign countries through international trade and input-output linkages.

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Abstract: 

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